Sebi to introduce closing auction session framework after receiving 3,500 comments

The Securities and Exchange Board of India (Sebi) is preparing to release a new framework for the stock market's closing auction session after receiving more than 3,500 public comments on its proposals.

Speaking at an event hosted by the Commodity & Capital Market Participants Association of India (CPAI), Sebi Chairman Tuhin Kanta Pandey said the regulator would quickly process the feedback and move forward with the changes. The deadline for public comments on the consultation paper was 3 October.

"We will actually quickly look at all these comments and go ahead, because I think our proposals are quite clear," Pandey said, adding that the regulator would not need much time to compile and analyse the volume of responses. When asked if a formal circular on the new rules could be expected soon, he confirmed that it would be.

What is changing with the Closing Auction Session?

The regulator is reviewing the Closing Auction Session (CAS) — the mechanism used to determine daily closing stock prices through an auction — along with overall market timings and how settlement prices are calculated for index and stock derivatives on their expiry days.

Sebi first proposed the changes in September. The review was prompted by concerns over how the newly introduced CAS in the equity cash segment was affecting derivatives settlement prices. The consultation was designed to target these specific issues while giving market players a chance to suggest alternative ways to solve them, Pandey said.

Developing corporate bonds and easing foreign investment

Beyond the closing auction, Pandey mapped out Sebi's plans for other areas of the financial markets, particularly corporate bonds and foreign investment.

For the corporate bond derivatives market to grow, Pandey said three things are required: regulatory support, stronger technical infrastructure, and broader market participation. Sebi has been pushing to move more bond trading onto exchange-traded platforms. It has already set up an electronic bidding platform for primary bond sales, brought online bond platforms under regulatory oversight, and strengthened the request-for-quote systems used for secondary market trading.

"Bond indices and derivatives will be, I would think, a major milestone going forward," Pandey said.

On foreign portfolio investors (FPIs), Pandey said Sebi is currently working with the Reserve Bank of India (RBI) to streamline onboarding and make accessing Indian markets easier. Sebi has already allowed FPIs to trade in non-agricultural commodity derivatives as part of this push.

However, Pandey noted that while regulators can clear the path, they cannot control where the money goes. Whether foreign funds flow into or out of India ultimately depends on the returns and opportunities on offer compared to other global markets.

"All we can do at the regulatory stage is to listen to what the FPIs have to say, ease their onboarding and access," he said.